UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: June 30, 2000 Commission File Number: 0-18590
GOOD TIMES RESTAURANTS INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
84-1133368
(I.R.S. Employer Identification No.)
601 CORPORATE CIRCLE, GOLDEN, CO 80401
(Address of principal executive offices) (Zip Code)
(303) 384-1400
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(X) Yes ( ) No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Total number of shares of common stock outstanding at June 30, 2000.
2,226,995 SHARES OF COMMON STOCK, .001 PAR VALUE
Form 10-QSB
Quarter Ended June 30, 2000
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INDEX PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets - 3
June 30, 2000 and September 30, 1999
Consolidated Statements of Operations - 5
For the three months ended June 30, 2000
and 1999 and for the nine months ended
June 30, 2000 and 1999
Consolidated Statements of Cash Flow - 6
For the three months ended June 30,2000
and 1999 and for the nine months
ended June 30, 2000 and 1999
Notes to Financial Statements 7
ITEM 2. Management's Discussion and Analysis 8
PART II - OTHER INFORMATION
ITEMS 1 through 6. 12
Signature 14
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GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
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<C> <C> <C>
June 30, September 30,
2000 1999
____ ____
CURRENT ASSETS:
Cash and cash equivalent $889,000 $1,748,000
Investments, at fair value 299,000 299,000
Receivables 127,000 192,000
Inventories 74,000 55,000
Prepaid expenses and other 54,000 37,000
Notes receivable 50,000 48,000
_________ _________
Total current assets 1,493,000 2,379,000
PROPERTY AND EQUIPMENT, at cost:
Land and building 3,703,000 3,340,000
Leasehold improvements 2,629,000 2,349,000
Fixtures and equipment 3,719,000 3,039,000
__________ _________
10,051,000 8,728,000
Less accumulated depreciation
and amortization (3,655,000) (3,080,000)
__________ __________
6,396,000 5,648,000
OTHER ASSETS:
Notes receivable 418,000 435,000
Deposits & other 68,000 75,000
__________ __________
486,000 510,000
TOTAL ASSETS $8,375,000 $8,537,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
debt and capital leases $ 187,000 $ 399,000
Accounts payable 250,000 607,000
Lease obligations, RTC and Las Vegas 121,000 202,000
Accrued liabilities - other 574,000 607,000
__________ __________
Total current liabilities 1,132,000 1,815,000
LONG-TERM LIABILITIES:
Debt and capitalized leases,
net of current portion 1,718,000 747,000
Lease obligations, RTC and Las Vegas,
net of current portion 192,000 260,000
Deferred liabilities 338,000 313,000
__________ __________
Total long-term liabilities 2,248,000 1,320,000
MINORITY INTERESTS IN PARTNERSHIPS 1,195,000 1,310,000
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
5,000,000 shares authorized,
None issued and outstanding 0 0
Common stock, $.001 par value;
50,000,000 shares authorized,
2,226,995 shares issued and
outstanding as of June 30,
2000 and 2,221,507 shares
issued and outstanding as
of September 30, 1999 2,000 2,000
Capital contributed in excess
of par value 13,221,000 13,203,000
Accumulated deficit (9,423,000) (9,113,000)
__________ __________
Total stockholders' equity 3,800,000 4,092,000
__________ __________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $8,375,000 $8,537,000
========== ==========
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GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
Three Months Ended Nine Months Ended
June 30, June 30,
<C> <C> <C> <C> <C>
2000 1999 2000 1999
____ ____ ____ ____
NET REVENUES:
Restaurant sales, net $3,991,000 $3,331,000 $10,462,000 $9,954,000
Franchise net revenues 68,000 82,000 154,000 210,000
__________ __________ _________ __________
Total revenues 4,059,000 3,413,000 10,616,000 10,164,000
RESTAURANT OPERATING EXPENSES:
Food & paper costs 1,401,000 1,148,000 3,684,000 3,574,000
Labor, occupancy & other 1,617,000 1,285,000 4,429,000 3,912,000
Opening expenses 0 0 75,000 0
Accretion of deferred rent 10,000 7,000 27,000 21,000
Depreciation & amortization 196,000 152,000 554,000 461,000
_________ _________ ________ _________
Total restaurant
operating costs 3,224,000 2,592,000 8,769,000 7,968,000
INCOME FROM RESTAURANT
OPERATIONS 835,000 821,000 1,847,000 2,196,000
OTHER OPERATING EXPENSES:
Selling, general &
administrative expenses 658,000 560,000 1,972,000 1,691,000
Loss (income) from
operating RTC stores 0 20,000 16,000 37,000
Loss (gain) on sales of
restaurants and equipment 0 (66,000) 0 (70,000)
------- ------- --------- ---------
Total other operating
expenses 658,000 514,000 1,988,000 1,658,000
INCOME (LOSS) FROM OPERATIONS 177,000 307,000 (141,000) 538,000
OTHER INCOME & (EXPENSES)
Minority income (expense),
net (85,000) (128,000) (130,000) (310,000)
Interest, net (19,000) 12,000 (33,000) 10,000
Other, net (2,000) (57,000) (6,000) ( 52,000)
-------- -------- -------- ---------
Total other income &
expenses (106,000) (173,000) (169,000) (352,000)
NET INCOME (LOSS) APPLICABLE
TO COMMON STOCKHOLDERS $ 71,000 $ 134,000 ($310,000) $186,000
========= ========= ========= ========
NET INCOME (LOSS) PER
COMMON SHARE $.03 $.07 ($.14) $.10
WEIGHTED AVERAGE COMMON SHARES AND
EQUIVALENTS USED IN PER SHARE CALCULATION
BASIC 2,226,995 1,945,346 2,225,493 1,820,213
DILUTED 2,226,995 1,963,500 2,225,493 1,844,282
</TABLE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Three Months Ended Nine Months Ended
June 30, June 30,
<C> <C> <C> <C> <C>
2000 1999 2000 1999
____ ____ ____ ____
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $71,000 $134,000 ($310,000) $186,000
Depreciation and
amortization 209,000 174,000 593,000 502,000
Changes in operating assets
& liabilities--
(Increase) decrease in:
Prepaids & receivables (19,000) (361,000) 49,000 (345,000)
Inventories (4,000) (1,000) (19,000) 2,000
Other assets 22,000 (296,000) 22,000 (303,000)
Opening expenses 0 0 0 (1,000)
(Decrease) increase in:
Accounts payable 136,000 (19,000) (356,000) (21,000)
Accrued interest 0 0 4,000 0
Accrued property taxes (76,000) (78,000) (18,000) (15,000)
Accrued payroll & P/R taxes 15,000 1,000 20,000 (2,000)
Other accrued liabilities/
deferred income 30,000 (23,000) (162,000) (97,000)
_______ _______ _______ _______
Net cash provided by
(used in) operating 384,000 (469,000) (177,000) (94,000)
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) sale - FF&E,
land, building &
improvements (475,000) (141,000) (1,341,000) (251,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt incurred (paid) (32,000) 173,000 758,000 97,000
Minority interest (38,000) (43,000) (115,000) (118,000)
Paid in capital activity 0 1,037,000 17,000 1,353,000
-------- --------- -------- ---------
Net cash provided by (used in)
financing activities (70,000) 1,167,000 660,000 1,332,000
INCREASE (DECREASE) IN CASH ($161,000) $557,000 ($858,000) $ 987,000
========= ========= ======== =========
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GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. UNAUDITED FINANCIAL STATEMENTS:
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all of the normal recurring adjustments necessary
to present fairly the financial position of the Company as of June 30, 2000, the
results of its operations and its cash flow for the three month period ended
June 30, 2000 and for the nine month period ended June 30, 2000. Operating
results for the three month period ended June 30, 2000 and for the nine month
period ended June 30, 2000 are not necessarily indicative of the results that
may be expected for the year ending September 30, 2000.
The consolidated balance sheet as of September 30, 1999 is derived from the
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. As a result, these financial
statements should be read in conjunction with the Company's Form 10-KSB for the
fiscal year ended September 30, 1999.
2. CONTINGENT LIABILITY:
The Company remains contingently liable on several leases of restaurants that
were previously sold. The Company is also a guarantor on a Small Business
Administration loan to a franchisee.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE COMPANY
GENERAL
This Form 10-QSB contains or incorporates by reference forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended. Also, documents subsequently filed by the Company with the commission
and incorporated herein by reference may contain forward-looking statements.
The Company cautions investors that any forward-looking statements made by the
Copany are not guarantees of future performance and that actual results could
differ materially from those in the forward-looking statements as a result of
various factors, including but not limited to the following:
(I) The Company competes with numerous well established competitors who
have substantially greater financial resources and longer operating
histories than the Company. Competitors have increasingly offered
selected food items and combination meals, including hamburgers, at
discounted prices, and continued discounting by competitors may
adversely affect revenues and profitability of company restaurants.
(II) The Company may be negatively impacted if the Company is unable to
sustain same store sales increases. Sales increases will be
dependent, among other things, on the success of Company advertising
and promotion of new and existing menu items. No assurances can be
given that such advertising and promotions will in fact be
successful.
The Company may also be negatively impacted by other factors common to the
restaurant industry such as: changes in consumer tastes away from red meat and
fried foods; increases in the cost of food, paper, labor, health care, workers'
compensation or energy; inadequate number of hourly paid employees; and/or
decreases in the availability of affordable capital resources. The Company
cautions the reader that such risk factors are not exhaustive, particularly with
respect to future filings.
The Company had thirty-three restaurants open at June 30, 2000, of which
fourteen were franchised restaurants, nine joint-venture restaurants and ten
company-owned restaurants compared to twenty-nine restaurants open at June 30,
1999, of which fourteen were franchised restaurants, nine joint-venture
restaurants and six company-owned restaurants. Management anticipates that the
Company and its existing franchisees will develop a total of one to two Good
Times restaurants in the Denver ADI in calendar year 2000.
The following presents certain historical financial information of the
operations of the Company. This financial information includes the results of
the Company for the three months and nine months ended June 30, 1999 and the
results of the Company for the three months and nine months ended June 30, 2000.
RESULTS OF OPERATIONS
NET REVENUES. Net restaurant sales for the three months ended June 30, 2000
increased 19.8% or $660,000 to $3,991,000 from $3,331,000 for the same prior
year period. Net restaurant sales increased $526,000 from three company-owned
restaurants that opened in October and December 1999 and February 2000, and
$123,000 from one company-owned restaurant that was purchased from a franchisee
in May 2000. Same store sales for company-owned and joint-venture restaurants
increased $11,000 (.3%) for the three months ended June 30, 2000 from the same
prior year period. A new media advertising campaign began March 15, 2000
promoting two new menu items. As a result of the revised strategy and new
product introductions, the increase in same store sales represents a positive
change in the customer traffic trend from the three months ended March 31, 2000
of approximately 13%. Management anticipates continued media advertising
throughout the remainder of fiscal 2000 accompanied by new product introductions
and promotion. Franchise revenue decreased $14,000 for the three months ended
June 30, 2000 due to a decrease in franchise fee income offset by an increase in
franchise royalty income from the same prior year period.
Net restaurant sales for the nine months ended June 30, 2000 increased 5.1% or
$508,000 to $10,462,000 from $9,954,000 for the same prior year period. Net
restaurant sales increased $1,185,000 from three company-owned restaurants that
opened during the nine months ended June 30, 2000, and $123,000 from one
company- owned restaurant that was purchased from a franchisee in May 2000.
Same store sales for company-owned and joint-venture restaurants decreased
$800,000 or (-8.0%) for the nine months ended June 30, 2000 from the same prior
year period. Franchise revenue decreased $56,000 for the nine months ended
June 30, 2000 due to a decrease in franchise royalty and fee income from the
same prior year period, resulting from a same store sales decrease for franchise
stores of (-10.0%), and a $20,000 decrease in franchise fee income compared to
the same prior year period.
FOOD AND PAPER COSTS. Food and paper costs increased to 35.1% of net restaurant
sales for the three months ended June 30, 2000, compared to 34.5% for the same
prior year period. Since October 1, 1999 cost of sales has increased
approximately .9% of net restaurant sales due to increases in the cost of meat,
french fries and other miscellaneous commodity costs. In addition, several
pricing and portion changes were implemented during the three months ended June
30, 2000 to improve the overall value provided to the customer.
Food and paper costs decreased to 35.2% of net restaurant sales for the nine
months ended June 30, 2000 compared to 35.9% for the same prior year period. The
prior year period included the promotion of a higher cost of sales menu item.
LABOR, OCCUPANCY AND OTHER EXPENSES. For the three months ended June 30, 2000
the Company's labor, occupancy and other expenses increased $332,000 from
$1,285,000 (38.6% of net restaurant sales) to $1,617,000 (40.5% of net
restaurant sales) compared to the same prior year period.
For the nine months ended June 30, 2000 the Company's labor, occupancy and other
expenses increased $517,000, from $3,912,000 (39.3% of net restaurant sales)
to $4,429,000 (42.3% of net restaurant sales) compared to the same prior
year period.
The increase in labor, occupancy and other expenses for the three months and
nine months ended June 30, 2000 is attributable to 1) the current year period
expenses include three additional restaurants that opened in the nine month
period and one additional restaurant purchased from a franchisee in May 2000; 2)
a decrease in same store sales for the nine month period, which causes
restaurant expenses to increase as a percentage of restaurant sales and
3) higher average wages for hourly employees.
DEPRECIATION AND AMORTIZATION EXPENSES. For the three months ended June 30,
2000 the Company's depreciation and amortization expenses increased $44,000,
from $152,000 to $196,000 compared to the same prior year period.
For the nine months ended June 30, 2000 the Company's depreciation and
amortization expenses increased $93,000, from $461,000 to $554,000 compared to
the same prior year period.
The increase in depreciation and amortization expenses for both the three months
and nine months ended June 30, 2000 is attributable to the three new restaurants
that opened in October and December 1999 and February 2000, as well as the
restaurant purchased from a franchisee in May 2000.
INCOME FROM RESTAURANT OPERATIONS. For the three months ended June 30, 2000,
income from restaurant operations increased to $835,000 from $821,000 for the
same prior year period. The Company's income from restaurant operations as a
percentage of net restaurant sales decreased to 20.9% for the three months ended
June 30, 2000 from 24.6% for the same prior year period. Cash flow from
restaurant operations (income from restaurant operations plus depreciation and
amortization) decreased to 25.8% of net restaurant sales for the three months
ended June 30, 2000 from 29.2% for the same prior year period.
For the three months ended June 30, 2000 the decrease in both income and cash
flow from restaurants as a percentage of net restaurant sales resulted from an
increase in labor, occupancy and other costs of 1.9%, from 38.6% to 40.5%.
For the nine months ended June 30, 2000, income from restaurant operations
decreased to $1,847,000 from $2,196,000 for the same prior year period. The
Company's income from restaurant operations as a percentage of net restaurant
sales decreased to 17.7% for the nine months ended June 30, 2000 from 22.1% for
the same prior year period. Cash flow from restaurant operations (income from
restaurant operations plus depreciation and amortization) decreased to 22.9% of
net restaurant sales for the nine months ended June 30, 2000 from 26.7% for the
same prior year period.
For the nine months ended June 30, 2000 the decrease in both income and cash
flow from restaurants as a percentage of net restaurant sales is a direct result
of a decrease in same store net restaurant sales, which causes restaurant
expenses to increase as a percentage of net restaurant sales. Additionally,
the nine months ended June 30, 2000 includes new store opening expenses of
$75,000 compared to none for the same prior year period.
INCOME (LOSSES) FROM OPERATIONS. The Company had income from operations of
$177,000 in the three months ended June 30, 2000 compared to income from
operations of $307,000 for the same prior year period. The reduction in income
from operations of $130,000 is attributable to an increase in advertising
expenses of $103,000, a decrease in the gain on sales of restaurants and
equipment of $66,000, offset by an increase in income from restaurant operations
of $14,000, a decrease in general and administrative expenses of $5,000 and a
decrease in the loss from operating RTC stores of $20,000 compared to the same
prior year period.
The Company had a loss from operations of ($141,000) in the nine months
ended June 30, 2000 compared to income from operations of $538,000 in the same
prior year period. The reduction in income from operations of $679,000 is
attributable to a decrease in income from restaurant operations of $349,000, an
increase in advertising expenses of $237,000, an increase in general and
administrative expenses of $44,000, a decrease in the gain on sales of
restaurants and equipment of $70,000 offset by a decrease in the loss from
operating RTC stores of $21,000 compared to the same prior year period.
The increase in advertising expenses for the three months and nine months ended
June 30, 2000 is attributable to increased media levels and production costs.
During the last six months, the Company has developed several new products for
introduction through the end of the fiscal year and has revised its media buying
and creative strategies. Management anticipates total advertising expenses for
the last three months of the fiscal year to be approximately the same as they
were in the nine months ended June 30, 2000 as a percent of sales.
The increase in general and administrative expenses for the nine months ended
June 30, 2000 is primarily attributable to an increase in corporate salaries and
benefits expense as well as an increase in depreciation expense compared to the
same prior year period.
NET INCOME (LOSS). Net income for the Company was $71,000 for the three months
ended June 30, 2000 compared to net income for the Company of $134,000 for the
same prior year period. Minority interest expense decreased $43,000 in the three
months ended June 30, 2000 from the same prior year period. This decrease was
attributable to the reduced income from restaurant operations from the joint-
Venture restaurants compared to the same prior year period. Net interest expense
increased $31,000 for the three months ended June 30, 2000 from the same prior
year period. This increase was attributable to an increase in interest expense
of $20,000 and a decrease in interest income of $11,000 compared to the same
prior year period, due to an increase in the outstanding debt for three new
stores compared to the same prior year period. Other net expenses decreased
$55,000 for the three months ended June 30, 2000 from the same prior year period
due to a $67,000 expense in the three months ended June 30, 1999 related to the
condemnation of a property.
For the nine months ended June 30, 2000, the net loss for the Company was
($310,000) compared to net income for the Company of $186,000 for the same
prior year period. Minority interest expense decreased $180,000 in the nine
months ended June 30, 2000 from the same prior year period. Net interest expense
increased $43,000 for the nine months ended June 30, 2000 from the same prior
year period. The increase in net interest expense was attributable to an
increase in interest expense of $53,000 offset by an increase in interest income
of $10,000 compared to the same prior year period. Other net expenses for the
nine months ended June 30, 2000 decreased $46,000 from the same prior year
period. Included in other expense for the nine months ended June 30, 1999 was
an expense of $67,000 related to the condemnation of a property.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000 the Company had $889,000 cash and cash equivalents and
$299,000 in marketable securities on hand. The Company's cash balance and cash
generated from operations will be used for the development of Company-operated
restaurants and other general corporate purposes. The Company had a working
capital surplus of $361,000 as of June 30, 2000.
Management believes the current cash on hand, cash generated from operations,
and existing financing commitments will be sufficient to fund the Company's
working capital and capital expenditure requirements. Management anticipates
developing one new company-owned restaurant during the balance of 2000.
Cash flow provided by operating activities for the three months ended June
30, 2000 of $384,000 includes an increase in accounts payable of $136,000 and a
reduction in accrued property taxes of $76,000. The increase in accounts
payable is due to the timing of when the Company's major supplier is paid and
the reduction in other accrued property taxes is due to the payment of annual
property tax bills in April 2000 of approximately $125,000.
Cash used in investing activities for the three months ended June 30, 2000
of $475,000 includes $59,000 of recurring restaurant related capital
expenditures, $33,000 for a building exterior remodel, $180,000 for new
restaurant development costs, and $203,000 for the purchase and interior remodel
of a restaurant purchased from a franchisee in May 2000.
Cash flow from financing activities for the three months ended June 30, 2000
includes $32,000 in scheduled debt payments.
The Company has remaining debt financing commitments of $2,000,000 for the
purchase of land and restaurant development and $900,000 for the development of
new restaurants on leased land.
For the nine months ended June 30, 2000, cash decreased $858,000. Cash used
in operations was $177,000, cash used in investing activities was $1,341,000 and
cash provided by financing activities was $660,000.
Cash provided by financing activities for the nine months ended June 30, 2000
includes $772,000 in debt financing proceeds for three new restaurants and
$300,000 in debt financing proceeds used to pay off a $300,000 note payable that
came due in the three months ended March 31, 2000.
IMPACT OF INFLATION
Drive Thru has not experienced a significant impact from inflation. It is
anticipated any operating expense increases will be recovered by increasing menu
prices to the extent that is prudent considering competition.
SEASONALITY
Revenues of Drive Thru are subject to seasonal fluctuation based primarily
on weather conditions adversely affecting restaurant sales in January, February
and March.
GOOD TIMES RESTAURANTS INC. & SUBSIDIARIES
Part II. - Other Information
Item 1. - Legal Proceedings
The Company is subject to legal proceedings which are incidental to its
business. These legal proceedings are not expected to have a material impact on
the Company.
The Company has been involved in condemnation proceedings with Westminister
Plaza LLC and the Westminster Economic Development Association as a result of
one of its restaurants being part of a condemnation of a larger development on
which it leased land from Westminster Plaza LLC. In June 1999 the court ruled
against the Company's claim for compensation for its leasehold improvements and
value of its lease. The Company has appealed the court's decision.
Item 2. - Changes in Securities
None.
Item 3. - Defaults Upon Senior Securities
None.
Item 4. - Submission of Matters to a Vote of Security Holders
None.
Item 5. - Other Information
None.
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are furnished as part of this
report:
EXHIBIT NO. DESCRIPTION
27.1 Financial Data Schedule.*
(b) During the quarter for which this report
is filed, Good Times Restaurants did not
file any reports on Form 8-K.
*filed herewith
SIGNATURE
Pursuant to the requirements of The Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOOD TIMES RESTAURANTS INC.
DATE: 8/02/00 BY: /S/ Boyd E. Hoback
__________________________
Boyd Hoback, President and
Chief Executive Officer
BY: /s/Susan Knutson
__________________________
Susan Knutson, Controller
